Question

Car dealership will sell you a car for 15,000 for $380 a month for 48 months. What is the interest rate?

Answer 1

The total price of the car after 48 monthly payments of $380 is:

$48*380=18240$

then, using the simple interest formula, we can use these values to get the following:

$18240=15000(1+48r)$

where r represents the interest rate. Solving for r, we get:

$\begin{gathered} 18240=15000(1+48r) \\ \Rightarrow1+48r=\frac{18240}{15000}=1.216 \\ \Rightarrow48r=1.216-1=0.216 \\ \Rightarrow r=\frac{0.216}{48}=0.0045=0.45\% \end{gathered}$

therefore, the interest rate is 0.45%